PRIME RESIDENTIAL REAL ESTATE MARKET - Knight Frank...on the primary market of high-budget residential real estate by the results of 2017. The total area of all lots sold in January-December

RESEARCH

The decrease in the average supply price was still caused by structural changes of supply, the market entry of new supply.

The trend growth of supply with fit-out: 9 out of 15 new complexes, entering the market in 2017, offered their customers fitted out lots.

Pick-up in buying activity in the primary market of the high-budget segment: 12% more flats and apartments were sold in 2017 than last year.

PRIME RESIDENTIAL REAL ESTATE MARKETMoscow

2017

HIGHLIGHTS

2

PRIME RESIDENTIAL REAL ESTATE MARKET. MOSCOW

prime Residential real estate market

Supply

Premium segment Dynamics* Elite

segment Dynamics*

Total supply, pcs 1,430 +44% 1,192 +3%

Average price, thousand rub./sq m 559 -10% 845 -4%

Average area, sq m 101 -4% 140 -7%

Average price, mln rub. 57 -14% 118 -11%

Demand

Premium segment Dynamics** Elite

segment Dynamics**

Total supply, pcs 470 -7% 320 61%

Average price, thousand rub./sq m 485 -7% 864 -13%

Average area, sq m 105 -% 155 -8%

Average price, mln rub. 51 -10% 134 -20%

* Q4 2017 / Q4 2016** 2017/ 2016Source: Knight Frank Research, 2018

Key indicators. Dynamics*

� An all-time high of the supply volume of the high-budget segment was registered in the market in H2 2017. The overall number of lots put up for sale exceeded 2,600 units. The volume of supply will keep up rising, moreover, the bulk of new properties will be launched in the first half of the year due to the amendments to 214-FZ, which come into force on July 1, 2018.

� The dynamics of the average market price of the supply was multidirectional resulting in downward tendency both in the premium and elite segments at the end of the year. In 2018, the market average is likely to remain stable: the price increase in new facilities that entered the market in 2017 at investment prices will be balanced by the active launch of new projects at minimum prices.

� The trend growth of supply with fit-out continued in 2017: 9 out of 15 new complexes, entering the market in 2017, offered their customers fitted out lots. Therefore, more than a quarter of the overall supply was presented by fitted out lots by the results of 2017. In 2018, this trend will persist, most of the new properties will be fitted out.

Key conclusions and trends

3

RESEARCH2017

Supply volume and average price dynamics of the primary market

Source: Knight Frank Research, 2018

0

200

400

600

800

1,000

0

50

100

150

200

250

300

350

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2016 2017

thousand sq m

Supply volume

thousand rub./sq m

Average price

Ljublino

Izmajlovo

Perovo

Krylatskoe

Danilovskiy

Сокольники

Ochakovo-Matveevskoe

Lefortovo

Kuz'minki

Basmannyj

Khoroshevskiy

Ryazanskiy

Filevskiy Park

Dorogomilovo

Nagorniy

Nagatinskij Zaton

Nizhegorodskij

Sokolinaja Gora

Begovoy

Gagarinskiy

Kotlovka

Fili-Davydkovo

Tekstil'shhiki

Meshhanskij

Nagatino-Sadovniki

Akademicheskiy

Marina Roshcha

Krasnosel'skij

Juzhnoportovyj

Lomonosovski

Prospekt Vernadskogo

Савеловский

11% ₽75 mln

6% ₽60 mln

7% ₽118 mln

1% ₽

5% ₽

14% ₽70 mln

10% ₽88 mln

13% ₽82 mln

14% ₽66 mln

10% ₽92 mln

1% ₽334 mln

2% ₽85 mln

2% ₽37 mln

244 mln

98 mln

Presnensky

SretenkaTverskoy

Patriarshie prudy

Chistye prudy

Tagansky

Zamoskvorech'e

Yakimanka

Ramenki

Khamovniki

Ostozhenka–Prechistenka

Pluschikha

Arbat

Sharein the total supply

Averageprice

> 11.5%5–11.5%< 5%

9% ₽ 76 mln

Share and average price by district


Supply2,622 flats and apartments (22% more against last year) were listed for sale on the primary market in the high-budget segment of residential real estate as of the beginning of 2018. The share of flats and apartments of the premium class was 55% in the overall supply structure, the elite class – 45%.

The total supply area was 311,000 sq m at the beginning of 2018, the supply volume in square meters increased more decently: +12% over the past year.

The supply growth was primarily due to the high development activity: the sales started in 15 new residential complexes of the primary market within 12 months of 2017. A year earlier, the number of new facilities, entering the market, amounted to 11 properties within 2016.

4


Property name Address Positioning

segment Developer Property type

Number of lots

Start of sales

Fit out availability

Estimated delivery

Barkli Gallery bld. 1, 6, Ordynsky Cul-de-sac elite Barkli flats 46 January Fitted out Q1 2018 г.

MOSS Apartments

bld. 4, 10, Krivokolenny Lane elite Adwill

Management apartments 13 February Fitted out Already delivered

The Mostman 7, B. Andron’evskaya St premium Investproekt flats 48 February Without fit out Q4 2018

Sofiysky bld. 4, 34, Sofiyskaya Emb premium Transstroj-

invest apartments 224 February Without fit out Q4 2018

ORDYNKA 25, M. Ordynka St elite Insigma Flats 81 March Fitted out Q4 2019

A-Residence 82, Sadovnicheskaya Emb premium O1 Properties apartments 181 April Fitted out Q1 2019

NV9/ARTKVARTAL

bld. 1, 9, Nikolovorobinsky Lane

premium State Development flats 99 April Without fit out Q2 2019

- Tverskoy District premium - apartments 46 June Without fit out 2019

Roza Rossa 7, Zubovskaya St elite KR properties apartments 120 August Fitted out Q4 2019

Olive House 34, Verknyaya St premium Donstroy flats 64 September Without fit out Q4 2019

Kutuzovskiy, 12 12, Kutuzovskiy premium Capital Group Flats 123 October Fitted out

(white box) Q4 2019

Tsvet 32 32, Tsvetnoy premium Hutton Developmen apartments 47 October Without fit out Q2 2019

Malaya Bronnaya, 15 15B, M. Bronnaya St elite Lid Estate Flats 23 October Fitted out Q4 2019

BOL'SHAYA DMITROVKA IX

9, B. Dmitrovka St elite Ingeocenter apartments 32 December Fitted out Q4 2020

Vishnevyy Sad 1, Mosfil'movskaya St elite AB Development flats 230 December Fitted out Q4 2020

New supply (new phases)

Sadovye Kvartaly 11, Usacheva St premium Inteco flats 187 February Without fit out Q3 2020

Depre Loft 17/1, Petrovsky Blvd premium KR-Properties flats 15 April Without fit out Q3 2018


Complexes where public sales were started in 2017

ties offered their customers fitted out lots. Moreover, finished flats were put up for sale in Polyanka/44 Residential Complex (Camellia and Muscat Mansions), and one apartment in U Patriarshih apartment com-plex was also fitted out. Therefore, more

The trend growth of supply with fit-out continued in 2017. Significantly, devel-opers offered fit-out not only in new complexes, but also in already marketed projects to diversify supply and trigger buyer interest. So, 9 out of 15 new proper-

In 2017, 6 out of 15 new facilities were marketed as the elite segment, thus adding 315 new lots to the supply of this segment in the past 12 months. The new supply in premium segment was about 1,000 new flats and apartments.

5

RESEARCH2017

Primary market supply in different construction stages


Primary market supply structure


31.1%

6.1%

0.2%

0.0%

0.0%

8.3%

23.5%

5.6%

0.8%

0.2%

0.3%

6.8%

5.0%

1.1%

0.0%

0.0%

1.2%

1.9%

1.5%

0.5%

0.0%

0.4%

1.4%

2.0%

2.1%

Up to 100 sq m

100–150 sq m

150–200 sq m

200–250 sq m

Over 250 sq m

Up to 50 mln rub.

50–100mln rub.

100–150mln rub.

150–200mln rub.

Over 200mln rub.

29%18%14%39%Already deliveredFit-out worksGroundbreaking stage In-situ concreting

Property name Address Property type Positioning segment

Barkli Residence 1-2, Ordzhonikidze St Flats premium

Bunin 37, Pluschikha St Flats elite

Chekhov 18A, Malaya Dmitrovka St Apartments elite

il Ricco 11, Podsosensky Lane Apartments elite

MOSS Apartments 10, bld. 4, Krivokolenny lane Apartments elite

Nabokov 10/1, Kursovoy lane Apartments elite

Palazzo Imperiale 4/2, bld. 3, Shchetininskiy Flats premium

Vorob’ev Dom 4, Vorob'yevskoy Hwy Квартиры/Apartments premium

Club House on Sretenka 19, Daev lane Apartments premium

Club House on Kotel'nicheskaya 31, Kotel'nicheskaya Emb Flats elite

Sovremennik 13, Mashkova St Apartments premium

Rassvet Loft*Studio 3, Stolyarnyy lane Apartments premium


Commissioned objects in 2017 г.

than a quarter of the overall supply (28%) was presented by fitted out flats and apart-ments by the results of 2017.

Developers of individual complexes offer buyers the fit-out as a possible option. For example, the future residents of Renome Residential Complex can choose at extra cost the fit-out of flats of three stylistic solutions: bright Art Deco, everlasting clas-sic and calm modern.

More than 40% of the overall supply was focused in 3 districts:

� Ramenki (14.3%)

� Zamoskvorech’e (14.2%)

� Yakimanka (13.6%)

Over the past year, the Top-3 was almost completely restructured, where only Ramenki kept its leading position. Zamoskvorech’e and Yakimanka got to the Top-3 due to their supply volume as new properties were actively delivered to the market. Interestingly, Khamovniki left the Top-3 despite the fact that some new supply was added in Sadovye Kvartaly Residential Complex located in this district, where 187 flats were put out on the mar-ket, but high sales in the district and active launch of new properties to the whole market led to a reduction in the share of the district in the overall supply structure.

6


Supply based on their area

Supply based on their price



The share of supply at the groundbreak-ing stage rose from 30% in December 2016 to 39% by the results of 2017, which was primarily due to the active launch of new facilities at the zero cycle, for exam-ple, A-Residence Residential Complex, NV9/ARTKVARTAL, Sadovye Kvartaly, Sophiisky, etc.

12 residential complexes were commis-sioned in the high-budget segment in 2017. Therefore, the share of flats and apartments in delivered houses was 29%.

Properties delivered in 2017

Over the past year, the supply structure in both the premium and the elite segments suffered some changes. There was a shift towards less large and less expensive lots due to the launch of new supply in the form of rather compact premises at the starting, investment prices.

Thus, the average area of supply in new buildings of the premium class sank by 5 sq m to 101 sqm, in elite residential complexes the indicator also decreased (by 8 sq m) to 142 sq m.

Demand790 transactions with flats and apartments (12% up against 2016) were concluded on the primary market of high-budget residential real estate by the results of 2017. The total area of all lots sold in January-December 2017 came up to almost 99,000 sq m.

However, for the record, the dynamics of the number of transactions was multidirection-al in the context of segments. As a result, 470 flats and apartments (7% less against last year) were sold in the premium seg-ment in January-December 2017. The num-ber of transactions in the elite segment was growing on the contrary: 320 lots (1.6 times more than in 2016) were sold in the primary market for the year 2017.

The qualitative characteristics of transac-tions in the elite segment somewhat went down against the backdrop of the growing number of transactions. Thus, the aver-age price of sold flats and apartments decreased by 20% reaching 134 million rubles by the end of 2017. The average area of sold lots spiralled downwards: from 168 sq m to 155 sq m (-8% per year).

The average price of sold lots in the pre-mium segment also showed a negative trend (-10%) falling to 51 million rubles by

54%

1%

9%

1%

35%

21%

22%

11%4%

42%

Up to 100 sq m100–150 sq m150–200 sq m200–250 sq mMore than 250 sq m

Premium Elite

54%

1%

7%

<1%

38%

17%

32%

7%5%

39%Up to 50 mln rub.50–100 mln rub.100–200 mln rub.200–300 mln rub.More than 300 mln rub.

Premium Elite

Primary market supply structure


32.8%

8.9%

0.0%

0.0%

0.0%

5.6%

20.8%

8.0%

0.5%

0.0%

0.0%

3.8%

5.7%

1.3%

0.3%

0.0%

1.1%

1.8%

2.0%

0.4%

0.0%

0.5%

1.3%

1.9%

3.4%

Up to 100 sq m

100–150 sq m

150–200 sq m

200–250 sq m

Over 250 sq m

Up to 50 mln rub.

50–100mln rub.

100–150mln rub.

150–200mln rub.

Over 200mln rub.

The regulation of the market of apartments

The Ministry of Construction of the Russian Federation published a draft law on the regulation of the apartment market in October 2017, its main purpose was to introduce the concept of "apartment", extend the Housing Code to non-residential premises, and establish a legal mechanism

for transferring non-residential premises to apartments. The draft law stipulated that owners of non-residential premises in a building commissioned before January 1, 2019, had the right to transfer non-residential premises in such a building to apartments until December 31, 2021.

7

RESEARCH2017

The renovation program of five-story buildings

The start of the renovation program was announced at a meeting of the Moscow Mayor Sergey Sobyanin with President Vladimir Putin on February 21, 2017. As a result of voting of residents, the program included 5,177 houses that was approved by the mayor on August 1. The list of starting land plots for the construction was published in 2 months.

In general, this program is scheduled for 10-15 years, i.е. it will last until 2028–2033, 30 million sqm of residential housing is planned for construction for this period. Part of the housing built within the framework of renovation and not in demand by the participants of renovation will be put up for sale to the open market, but not earlier than in a couple of years.

Dynamics of the number and average value of transactions in the premium segment

Dynamics of the number and average value of transactions in the elite segment


the end of 2017. Their average area slightly decreased by 3% from 108 sq m in 2016 to 105 sqm in 2017. Thus, we can state that the space optimization is done in the pre-mium segment. Today, the average area of sold flats and apartments exceeds the sup-ply index: 105 sq m vs. 101 sq m.

As in the previous year, buyers preferred less expensive lots in 2017. The main interest of buyers in both the premium and elite segments was directed to flats

Structure of supply by districts


0

pcs

Supply volume Average volume

mln rub.

1020304050607080

0102030405060

2016 2017Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec

Supply volume Average volume

0

pcs mln rub.

0102030405060

2016 2017

50100150200250300350

Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec

3.0%

2.5%

3.5%

3.9%

3.9%

5.1%

5.4%

7.2%

11.5%

13.3%

15.2%

25.5%

Other

Sretenka

Chistye prudy

Arbat

Taganskiy

Yakimanka

Pluschikha

Presnensky

Ramenki

Tverskoy

Zamoskvorechye

Khamovniki

and apartments with a budget of up to 100 million rubles.

The undisputed leader of the premium segment remained Sadovye Kvartaly Residential Complex. One of the Top-3 best-selling leaders of the elite segment was Vishnevy Sad Residential Complex, its official sales were opened only at the end of the year, but there were already many booked flats in this complex at the time when it officially entered the market.

8


Leading projects

Barrin House

Sadovye Kvartaly

Vishneviy Sad

RENOME

Malaya Ordynka, 19

A-Residence




Transactions of the primary market based on their area

Transactions of the primary market based on their price

The Federal Law No. 214-FZ

New amendments were adopted to the Federal Law No. 214-FZ in 2017, they would come into force on July 1, 2018.

� Developer’s experience: partici-pation in the construction of mul-ti-unit residential buildings for at least three years and receipt of the permission to put into operation at least 10,000 sq m of housing.

� Establishment of a compensa-tion fund: the fund will be used to complete the construction in case the developer is bank-rupt. The fund will be formed by costs, which developers must pay out without fail before the construction start. The amount of the contribution will be 1.2% of the aggregate amount of all Agreements of Participation in Shared Construction that were concluded with the housing equity holders.

� Capital of the developer: The size of the developer's own equity must be at least 10% of the pro-ject cost.

� Documentation for construction: project documentation, as well as all permits must be published on the site of the developer. All documents must be addres- sed to the company that raises funds.

� The attracted funds can only be used for the construction of one property: all attracted funds should be directed only for the construction of an individual res-idential complex. The activities of the developer will be controlled through banking structures – all payments must pass through a single account opened in the credit institution.

� Reputation of the developer: there shall not be persons with unspent convictions for econom-ic affaires in the management team.

ELITE SEGMENT

PREMIUM SEGMENT

52%

2%

12%

1%

33%

18%

24%

11%

9%

38%Up to 100 sq m100–150 sq m150–200 sq m200–250 sq mMore than 250 sq m

Premium Elite

60%

5%

<1%

35%

15%

33%

9%8%

35%

Up to 50 mln rub.50–100 mln rub.100–200 mln rub.200–300 mln rub.More than 300 mln rub.

Premium Elite

9

RESEARCH2017

Dynamics of average price and supply volume

Izmajlovo

Perovo

Danilovskiy

Ochakovo-Matveevskoe

Lefortovo

Kuz'minki

Basmannyj

Khoroshevskiy

Ryazanskiy

Filevskiy Park

Dorogomilovo

Nizhegorodskij

Sokolinaja Gora

Begovoy

Gagarinskiy

Fili-Davydkovo

Tekstil'shhiki

Meshhanskij

Akademicheskiy

Marina Roshcha

Krasnosel'skij

Juzhnoportovyj

585 thousand rub./sq m

789 thousand rub./sq m -21%

1 705 thousand rub./sq m

543 thousand rub./sq m +7%








+25%

-11%

-9%

+12%

+8%

-10%

1 423 thousand rub./sq m


-6%

-20%

Presnensky

SretenkaTverskoy

Patriarshie prudy

Chistye prudy

Tagansky

Zamoskvorech'e

Yakimanka

Ramenki

Khamovniki

Ostozhenka–Prechistenka

Pluschikha

Arbat


DynamicsAverage price

Dynamics of average price


50

100

150

200

250

200

400

600

800

1,000

1,200

00

2016 2017Supply volume, premiumAverage price, premium

Supply volume, eliteAverage price, elite

thousand sq m thousand rub./sq m

Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec

PricesAt the beginning of 2018, the average supply price in the primary market of the high-budget segment was fixed at 713,000 rub./sq m. The indicator went down by 9% for 12 months of the last year. First of all, negative dynamics was a reflection of structural changes in the primary market caused by high development activity.

In 2017, the drop in the average supply price was registered in both segments. It was 10% down at the level of 559,000 rub./sq m in the premium segment. As for the elite segment, the negative dynamics was slightly

less there: -4% for 12 months to be equal to 848,000 rub./sq m according to the results of 2017.

The highest 2017 price of 1,705,000 rub./sq m was recorded at Patriarshiye Prudy growing by 12%, which was driven by the market launch of a new property - Malaya Bronnaya, 15 Residential Complex together with the end of sales in the Club House at Patriarshiye Prudy.

Sretenka remained the most inexpensive district, where the average price was 430,000 rub./sq m as of the beginning

of 2018. The indicator fell by 9% owing to the launch of the new premium residential complex Tsvet 32.

The largest growth of 2017 was demonstrated by Tverskoy district, where the supply price was 20% up against December 2016 reaching 738,000 rub./sq m. The upward trend of the average price for the district was connected with the start of sales of the new elite club house, as well as the launch of a new volume of supply in Depre Loft complex. Moreover, the price rise was recorded in Renome Residential Complex throughout the year.

10


© Knight Frank LLP 2018 – This overview is published for general information only. Although high standards have been used in the preparation of the information, analysis, view and projections presented in this report, no legal responsibility can be accepted by Knight Frank Research or Knight Frank for any loss or damage resultant from the contents of this document. As a general report, this material does not necessarily represent the view of Knight Frank in relation to particular properties or projects.

Reproduction of this report in whole or in part is allowed with proper reference to Knight Frank.

RESIDENTIALLudmila PotapovaDirector [email protected]

+7 (495) 981 0000

RESEARCHOlga ShirokovaDirector, Russia & CIS [email protected]

12 Kutuzovskiy ave. 9 Bolshaya Dmitrovka st.

Razdory-2Rublevo-Uspenskoe hw, 5

LimassolCyprus

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PRIME RESIDENTIAL REAL ESTATE MARKET - Knight Frank...on the primary market of high-budget residential real estate by the results of 2017. The total area of all lots sold in January-December

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